HUNTINGTON BEACH, CA—Institutional-fund manager Interstate Equities Corp. has acquired Surf at 39, a 400-unit, coastal-infill multifamily asset here, for $134 million from an unnamed seller. IEC intends to upgrade units to meet tenant needs but keep the complex as a workforce-housing community.
Surf at 39 is located at 16761 Viewpoint Lane, 1.2 miles from the 405 Freeway and 10 miles from John Wayne Airport. The asset consists of two- and three-bedroom apartments and townhomes.
Representatives of IEC declined GlobeSt.com's request to name the seller, but Real Capital Analytics reports that the seller was Lone Star Funds, that the property was previously named Huntington Villas, that MetLife provided approximately $95.9 million in financing for the transaction and that the seller had previously purchased the garden-style property in December 2015 for $115.5 million.
The need for workforce housing is great in a market where tenants are doubling up in order to afford rent. As GlobeSt.com reported in April 2017, while the practice of renters doubling up in apartments was common during the recession, it's happening once more as tenants face rising rental rates, a scarcity of apartments and the desire to live in markets where they can't afford to buy, Marcus & Millichap's first VP of investments Mark Bridge told us.
The acquisition was made on behalf of the firm's IEC Institutional Fund III L.P., a fully discretionary, $200-million commingled fund targeting value-add multifamily investments throughout coastal California. According to the firm's co-president and chief investment officer Marshall Boyd, IEC specializes in strategically acquiring unrenovated or partially renovated assets in coastal-infill market.
Boyd added in a prepared statement, “Surf at 39 will remain a workforce housing community. We are not moving the renovation spec to a class-A standard.” IEC plans to continue raising the property's rental rates over time as market demand dictates, he added.
Approximately 80% of the complex's units are in their original condition and are functional, “but we will upgrade them in order to meet tenant needs, while retaining the property's position as the best value for the dollar in its class,” Boyd explained. Surf at 39, which was originally constructed in 1972, consists of varying floorplans and includes two swimming pools with spas, a fully equipped business center, a fitness facility, clubhouse, dog park and barbecue area.
Sean Deasy and Ryan Fitzpatrick of HFF represented both the buyer and the seller. In addition, HFF's Charles Halladay and Peter Smyslowski arranged acquisition financing. Goodwin Proctor provided legal counsel and Eisner Amper an audit opinion.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
